Gold prices: The festive season is finally here, and investors are buzzing with excitement. With gold prices hitting fresh highs, the yellow metal has caught everyone’s attention. Plus, with the uncertain geopolitical situation and equity market outlook, it’s no wonder that gold's price trajectory has become even more attractive.
So far this year, gold prices have jumped by more than 24 per cent. In contrast, frontline indices— Sensex and Nifty—have delivered returns of over 10 per cent and 12 per cent, respectively.
Currently, Gold is trading at Rs 81,005 price level.
While a lot worked in favour of the yellow commodity this year, eventually pushing its price to fresh highs, the ongoing geopolitical uncertainty has left investors questioning whether to bet on gold in 2025. Here are some important factors that might influence gold prices in the coming year-
Geopolitical Uncertainty
The ongoing tensions in West Asia have already created turbulence in the geopolitical arena. If we by historical patterns, gold tends to perform well during times of geopolitical turbulence. "Investment in Gold increased considerably following Middle East after Iran and Lebanon joined Hamas against Israel. We expect the aftermath of war to continue next year which is supportive for Bullion," said Deveya Gaglani, Research Analyst - Commodities, Axis Securities.
Surge in gold reserves
As major economies continue to experience a relatively blurry future trajectory, central banks have started to increase their gold reserves. Since 2022, China has become the leading central bank in gold accumulation. The gold reserves have hit a record high of 2,262 tonnes. Gaglani expects this trend to continue next year, which will be beneficial for the bullion market.
The Greenback effect
While there is no direct pattern between the price direction of gold and the US dollar, some times there is an inverse relation at play. However, owing to the current geopolitical tensions, there has been a change in that pattern as both dollar and yellow metal has witnessed an uptrend in their value. But it is worth noting that countries like Russia, China and India are increasingly reducing their holdings of dollars and turning towards gold. As per the analyst, this is likely to drive up the price of gold in 2025.
Fed interest rate cut
The Federal Reserve finally started cutting interest rates in September, and that too by 50 basis points. "The Fed has also indicated the possibility of multiple rate cuts by the year end, which has boosted bullion prices. There is a high probability that the Fed will continue to cut rates next year as well, which would be beneficial for gold prices," said Gaglani.
